The Indian government is fast tracking the process of choosing Investment Bankers for its proposed Rs 40,000 crore($8.5 Billion) divestment of state owned companies in the current fiscal year ( March 2010-2011) which would be a 60% increase over last year. This comes in the wake of the big losses that investors of last year offerings are facing.Most of the PSUs ( Public Sector Undertakings) which did an IPO /FPO last year are trading below their listing prices despite the Indian markets being one of the best performing markets in the world.Even the private companies which have come out with IPOs in the recent past have been of extremely poor quality.
India’s biggest utility NTPC which came out with a Follow on Offering is trading at almost 5% below its listing price while Hydro Power utility NHPC is 20% below its listing price.Even the most recent listing SJVN which was supposed to leave something for the investors would have rewarded its investors with a 7% loss.Rural Electrification Corp has been the one face saver for the government giving a 40% gain to investors in its FPO
In the face of such results the government has to rethink its strategy on how to attract investors otherwise raising the proposed $8.5 billion would be a tall task.Note some of its offerings had to be “Bailed Out” by state owned insurers like LIC due to the poor response.Unless something changes drastically expect more such “Bailouts”.
The government decided to speed up the process for appointment of merchant bankers for its Rs 40,000 crore disinvestment plan.
Appointment of market intermediaries will be taken up simultaneously with the clearance for disinvestment of stake in a PSU.”The appointment of merchant bankers and other intermediaries will now be taken up simultaneously with the process of seeking CCEA approval as soon as the minister in charge has approved the case,” a statement said after a meeting of the Cabinet Committee on Economic Affairs.
Among the major PSUs which are likely to come out with public issues are Coal India, Indian Oil, MMTC, RINL and Shipping Corporation, Hindustan Copper, Power Grid and Manganese Ore India.